Block, the Jack Dorsey-led financial services technology firm formerly based in San Francisco, is letting go of at least a thousand employees.
The company is instituting an “absolute cap” on employees, meaning that no more than 12,000 people can be employed at Block—or Block-owned point-of-sale platform Square, payments app Cash App, buy-now-pay-later service Afterpay and music streamer Tidal—until company leaders “feel the growth of the business has meaningfully outpaced the growth of the company.”
The company employed just over 13,000 people at the end of the third quarter, according to its earnings call last week.
Block CEO Jack Dorsey echoed his concerns about growth in a memo to employees sent earlier last week. “I believe it’s slowing us down and frustrating everyone,” he wrote in the note. “Which is not fair to you all, or our customers.”
The layoff announcement was made public during its third-quarter earnings report last Thursday, where the company reported a record gross quarterly profit of $1.9 billion. The exact number of impacted workers is unclear, but Business Insider notes that headcount could decline by 10% by the end of the year.
Block has weathered ups and downs this year as analysts express doubts about its recent acquisitions of Afterpay and Tidal. (Analyst perception of the firm was also likely affected by allegations of user count inflation and fraud on Cash App by a short-seller.)
Block, like other high-growth tech companies, has also been hit by continuing high interest rates. Square, in particular, has been affected by broader trends in discretionary spending. As people cut back on restaurants and nonessential shopping—often at businesses that use Square for payments—Dorsey noted a decline in revenue on Square transactions.
These latest layoffs appear to adhere to a corporate ethos Dorsey—and Block—has begun publicly preaching: the “rule of 40.” The company, according to the principle, must reach “gross profit growth” of 40% or higher by 2026.
A company spokesperson told The Standard that Block’s layoff round in late September was also in adherence to the “rule of 40.”
Key to Block’s new strategy, according to the shareholder letter, will be unifying its suite of financial products more tightly, getting Square, Cash App and Afterpay customers to begin using the other Block-owned products.
Block stock rose by over 2% Wednesday to $52.27 a share. That share price is down around 19% compared with the start of 2023.